So far, however, a bullish follow-through has not materialized, possibly because buyers are waiting for a more credible evidence of bearish invalidation.

Also standing in the way of a potential rally are a number of major key resistance levels, as discussed yesterday.

Should BTC clear these key obstacles, then traders may feel convinced that the cryptocurrency has bottomed out again at the 21-month EMA support and could push prices higher toward long-term falling trendline resistance above $7,000.

The above scenario could play out if the three-day long narrowing price range (triangle pattern) is breached on the higher side. Interestingly, the moving averages on the short duration charts are aligned for a potential break above the triangle resistance.

At press time, BTC is trading largely unchanged on the day at $6,440 on Coinbase.

Hourly chart

The 50-, 100- and 200-hour exponential moving averages (EMAs) are trending north, indicating a bullish setup. Further, the stacking order of the 50-hour EMA above the 100-hour EMA, above the 200-hour EMA is a classic bullish signal.

As a result, BTC is more likely to cut through the upper edge of the triangle, currently at $6,460.

Another sign of a possible building directional change comes from the choppiness index, which has dipped below the 38.2 percent level.

So, it seems safe to say that triangle breakout, if confirmed, could yield a sharp move higher, possibly toward $6,800.

Daily Chart

Over on the daily chart, BTC has cleared the trendline falling from July highs and the 5-day and 10-day EMAs are beginning to rise in favor of the bulls.

Thus, prospects of a triangle breakout are high.

View

A triangle breakout looks likely and if confirmed, would signal a continuation of the rally from the Oct. 15 low of $6,151 and open the doors to $6,800.

A downside break of the triangle would shift risk in favor of a re-test of the 21-month EMA of $6,123.

Disclosure: The author holds no cryptocurrency assets at the time of writing.